EU imposes stricter KYC requirements on cryptocurrency firms

Governments in the EU have tentatively agreed on AML regulations for cryptocurrencies, which will force KYC requirements on crypto firms as part of a new regulatory crackdown on the unrestrained industry.

Major U.S. exchange Coinbase Global Inc. opposed the Council of Europe's rules (COIN.O).


According to a statement released on Wednesday by the European Parliament and Council, crypto companies will now be required to alert regulators about any suspicious transactions in order to assist in the fight against dark money.


The Commission's proposal to create the new EU Anti-Money Laundering Authority (AMLA) in July 2021 was also approved by the Council.


The EU Council issued a statement in which it stated that its members had accepted its partial (provisional) stance on the proposal because it had not yet decided where to locate the AMLA Headquarters. The EU governments will be engaging in extensive horse trading over this in the upcoming weeks.


AMLA is anticipated to "make a strong and useful contribution in fighting anti-money laundering and the financing of terrorism," according to a statement from the EU Council.

According to the organization, "among other tasks, it will contribute to the harmonisation and coordination of supervisory practices in the financial and non-financial sectors, the direct supervision of high-risk and cross-border financial entities and the co-ordination of financial intelligence units."


When it comes to crypto asset service providers, the Council gives AMLA new authority to directly supervise specific credit and financial institutions "if they are considered risky."


The Council also charges AMLA with overseeing up to 40 groups and entities and making sure that the internal market is fully covered, with additional authority to be granted to the general board in charge of running AMLA.


The Council also came to a provisional agreement on the transparency of cryptocurrency assets, which will compel cryptocurrency service providers to compile and make public certain data regarding the initiator and recipients of cryptocurrency transfers.


The Council stated that this would "ensure ttraceability of crypto-asset transfers in order to be able to better identify possible suspicious transactions and block them."


The new agreement will "enable the EU to deal with the risks of money laundering and terrorist financing" associated with cryptocurrencies, while "reconciling competitiveness, consumer and investor protection and the protection of the financial integrity of the internal market," the Council promised.


Co-legislators also concurred that no additional data protection laws need be established because GDPR is still applicable to money transfers.


Before being formally adopted, the provisional agreement must now be approved by the Council of Europe and the European Parliament.


Global regulation of the $2.1 trillion cryptocurrency market is still patchy.


To become effective after being written, the rules must be approved by numerous bodies. According to the statement, the oversight would guarantee that crypto assets could be tracked in the same way as conventional money transfers.


According to Ernest Urtasun, a member of the Spanish Green Party who helped shepherd the legislation through the European parliament, "the new rules will enable law enforcement officials to be able to link certain transfers to criminal activities and identify the real person behind those transactions."


Crypto businesses urged policymakers to make sure their regulations did not go beyond those set forth by the global Financial Action Task Force (FATF), which establishes standards for combating money laundering, in a letter seen by Reuters and sent to 27 EU finance ministers on April 13.


On Wednesday, the European Parliament and Council announced that the proposed regulations would also apply to transactions over 1,000 euros ($1,044.20) with service providers made through "unhosted" cryptocurrency wallets, which are those maintained by private individuals rather than a licensed cryptocurrency exchange.

By fLEXI tEAM